Anticipated Uncertainty, Earnings Announcements and Equity Options

Norman Johannes Seeger, Andreas Kaeck, Michael Johannes

Research output: Contribution to journalArticle

Abstract

This paper uses option prices to learn about the equity price uncertainty surrounding information released on earnings announcement dates. To do this, we introduce reduced-form models and estimators to separate price uncertainty regarding earnings announcements from normal day-to-day volatility. Empirically, we find strong support for the importance of earnings announcements. We find that the anticipated price uncertainty is quantitatively large, varies across time, and is informative about the future return volatility. Finally, we quantify the impact of earnings announcements on formal option pricing models.
LanguageEnglish
Number of pages82
JournalReview of Financial Studies
StateAccepted/In press - 2018

Cite this

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title = "Anticipated Uncertainty, Earnings Announcements and Equity Options",
abstract = "This paper uses option prices to learn about the equity price uncertainty surrounding information released on earnings announcement dates. To do this, we introduce reduced-form models and estimators to separate price uncertainty regarding earnings announcements from normal day-to-day volatility. Empirically, we find strong support for the importance of earnings announcements. We find that the anticipated price uncertainty is quantitatively large, varies across time, and is informative about the future return volatility. Finally, we quantify the impact of earnings announcements on formal option pricing models.",
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Anticipated Uncertainty, Earnings Announcements and Equity Options. / Seeger, Norman Johannes; Kaeck, Andreas; Johannes, Michael.

In: Review of Financial Studies, 2018.

Research output: Contribution to journalArticle

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